Paper Session 1: Alternative Monies

July 28, 2008

What people are calling “digital money” today is nothing else but “old” money which can be accessed through digital instruments. The value is not stored on an electronic device (chip, magnetic stripe, pc or elsewhere) but is still registered at a traditional account at a bank or at an other provider. So only the access instruments to the funds are digital, not the money itself. On the other hand, almost all the account based funds should be digital money because the registration of the account information is not written in the books (scriptural money) but stored as bits and bytes.

But there was a real invention in monetary history and evolution. It was the electronic purse, a specific string of information with a monetary value stored in the chip of a card or on the hard disk of a pc, which could be directly transferred from person-to-person without the existence of an account. Developed in the early 90s as revolutionary concepts of a new monetary order which could mean the end of the worldwide central bank monopoly of the old cash. After a period of innovation and euphoria (1990-1995), central banks started to domesticate the digital cash by regulation (1995 – 2000). The forerunners of internet based e-purses, like Mondex and Digicash failed. Only card-based products survived in the market, until now a niche product in European and Asian markets kept under highly surveillance of the monopolists of the “old” money.

The period from 2000 until now could be seen as the period of disappointment, but also of re-egineering. Non-banks like telcos started to issue “new” account-based emoney regulated in Europe as “e-money-institutions”. But real innovations like emoney are still lacking which could be (anonimous) transferable from person to person or new digital “numeraires” (as a new private currency not nominated in state money units like $ or €). Most of the private money issuance (like the “Regio” money in Germany) is still based on traditional money (cash or scriptural money).

The focus of this presentation is the “history” of real digital money, its regulation and its potential for a new run-up.

About the author

Hugo Godschalk, a native Dutchman from Den Haag (1957) has been living and working in Germany for over 30 years. Following his PhD in economics from the University of Münster in 1982, he started his career in the payments industry at the Gesellschaft für Zahlungssysteme (GZS; now part of First Data International), last as head of the business administration. From 1990 on, he worked for 3 years as a senior consultant for Ordina (Germany) GmbH, covering payment and card business related topics. Since 1993 he has been managing director and partner of PaySys Consultancy (Frankfurt), a consultancy specialised in card business (www.paysys.de). Since 2000 he represents the European Payments Consulting Association (EPCA) as director (www.epca.de).

Other assignments: • Expert Member of the Payment Systems Market Group of the European Commission • Member of the advisory board of the Payment Data Bank Paycomm (www.paycomm.org) • Member of the committee of experts of the national network of Regiogeld initiatives in Germany

After 5 years (1979 – 1984) of scientific research and teaching at the Institute for money and currency at University of Münster with main topics in the area of payment innovations and electronic money his academic focus is still at monetary innovation and reforms as well as monetary history of private money during the Great Depression. The results were published in various books and articles and presented at national and international conferences.

Studies of usury and the public response to the abuse of money suggest centralised systems are undesirable for the management and control of the issue of coinage (metal, paper & digital). Academic study is needed into the structure and modus operandi of decentralist Mints and Exchanges serving the money needs of ordinary people in the real economy.

The Real Pound Project was first at the Radical Consultation in September 2001. The paper is the third of six research papers…the others are Birmingham as Number One (1986), The Wealth of CountiesEnergy Currencies (2006) and The Future of Local Money (2008). A sixth paper on The Doctrine of Usury based on historical research into public usury policy is due out next year.

Decentralised public and private mints and exchanges conduct their business in a structure of legal statutes such as the Usury Law of 1571 or the Legal Tender Act of 1862. Money is political and the division of power and means of enforcement are in the small print. The paper explores the way The Real Bank of Wiltshire might operate under licsence from a publicly accountable Real Bank of Wessex.

Peter Etherden is a radical economist who writes under the nom de plume of William Shepherd. For 25 years he has been a regular contributor to the London-based political journal Fourth World Review. In 1993 he co-founded the Cliff’s End Signalling Company, an independent policy and strategy development forum. cesc maintains a website for discerning radicals and publishes the work of cesc scholars.

Innovation in money is really quite rare.
While the carrier (the medium) is increasingly digital,
almost all the money itself (the message) is still massive and
substantial in nature, a commodity supposed to carry value in itself -
limited quantity, goes anywhere, issued by authorities - money 1.2, 1.3
maybe, but still money 1.n. It's still simply stuff. And definitely
"their" money, not ours.

The value in a 1.n money is intended to be in the money itself, not in the users. That's how it works.

But
consider the consequent patterns. Our income comes from anywhere, our
spending goes anywhere. The "original" sources and "end" destinations
are all well out of our reach and completely beyond our control. And
this is true for all - people and organizations alike - we don't know
where the money we spend is going, and we don't know where it's coming
from. Most problematically, we don't know whether it's going to
continue coming. These are the realities of markets confined to money
1.n. It is not healthy that we are all so driven. Fortunately there
are other possibilities.

As with web 2.0, so money 2.0 is emergent from the context of information systems. Money 2.0 is
information,
not mass or commodity. It measures, it moves and it is a social
agreement. Both as individuals and organizations, we can create
our own community currencies with each other - monies that will circulate within our networks, communities, associations.

And
it's only "with each other" that community currencies can work. The
private currencies proposed by Hayek and corporate currencies like
AirMiles (m$ & goo$ maybe?) are going to succeed and/or fail not
so much on the status of the issuer, as on the quality of the community
of users. The most productive forms will be those most compatible with
the medium, and the needs and purposes of the users will be much more
important than those of the corporation.

The
term "open money" applies to the field of opportunity for such
community currencies, which will be realised / expressed in forms of
socio-economic neo-tribalism.

Money
cultures and technologies will co-evolve more rapidly beside and beyond
the established structures than within them. Mobile technologies for
money - MPESA, OBOPAY for instance - are establishing in the developing
world where landlines and conventional banking are unrealistic.
Before any such systems were released for "real" money between "real"
users and "real" bank accounts, you can be sure they were tested on
virtual users and virtual banks, and moved virtual money. Systems
that can support "real" money can readily support other currencies in
parallel - how long before we have chips with everything?

The
ability to move discrete currencies through the supply chain will have
many applications. It will for instance make agreements - such as that
between Burger King and Florida tomato pickers for a retail price hike
to pass through to the farmgate - much easier to implement and monitor,
to "follow the money" and make sure it indeed goes where it is
intended. Virtual currencies can also track the accumulation of carbon
and other environmental costs, as in the BT Carbon Disclosure project
and recent developments in product labelling in Japan and will likely
provide the infrastructure for such urgent initiatives as TEQS.

From theory and projection to the matter of practical demonstration. The community way program (youtube video)
- is a general application intended to not only do what it does - raise
funds for community needs - but also act as ignition for local /
regional open money development collaborations. It is designed for
anywhere with a population over 100,000 (or less), for anyone with access to internet
(direct or indirect), anytime they're ready (almost). All parts are
well tested and the whole has been verified under adverse conditions,
occasionally and briefly.

Until very recently, we
could not provide on-line multi-currency accounting support to remote
communities - local independent services and operations were required,
with varieties of complications. And, until such independent networks
can be linked, the benefits of applications like community way programs
are mainly available to smaller businesses operating in single markets,
as larger corporations are active in widely distributed markets.

However, recent open money systems and software development now provide
for global networks, and so open many possibilities for major
corporations. If time allows I will speak briefly about some of these,
and particularly about community development funding models that bring
the ethics and purposes of microcredit to the context of money 2.0.

About the author

Michael
Linton, not formally educated as an economist, has been active in the
development and implementation of virtual money systems since 1982 - LETSystems and related tools in particular.